Results Exceed Estimates
Gross Margin Improves 260 Basis Points
ATLANTA, Oct. 27 /PRNewswire-FirstCall/ -- Newell Rubbermaid Inc.
(NYSE: NWL) today reported its third quarter 2005 results which were above
expectations and included strong gross margin improvement.
Third Quarter Results
Income from continuing operations for the third quarter ended
September 30, 2005, was $53.5 million, or $0.19 per share. Excluding
impairment charges, income from continuing operations was $112.1 million, or
$0.41 per share. These results include a tax benefit of $15.3 million, or
$0.06 per share, offset by restructuring and related charges of approximately
$25 million, or $0.06 per share. Approximately $0.02 per share of
restructuring and related charges planned for the third quarter were not
incurred. Loss from continuing operations for the third quarter ended
September 30, 2004, was $155.7 million, or $0.57 per share. Excluding
restructuring and impairment charges, income from continuing operations for
the third quarter 2004 was $98.6 million, or $0.36 per share. A
reconciliation of the results "as reported" to results "excluding charges" is
attached to this press release.
Net sales in the third quarter 2005 were $1.60 billion, compared to
$1.62 billion in the third quarter 2004, a decrease of 1.4%. Net sales
reflected a positive pricing impact of 1.9% and a foreign currency benefit of
0.9%. These were offset by a core sales decline of 1.7%, primarily driven by
continued weakness in the European Window Fashions and Little Tikes businesses
as well as the negative volume impact of price increases in Rubbermaid Home
Products, and an additional 2.5% resulting from the planned exit of certain
low-margin product lines. The businesses the company includes in its "Invest"
category generated a 3.7% improvement in sales versus last year.
"Since stepping in to lead the organization, I've seen first hand the
solid foundation that is in place at Newell Rubbermaid. I am committed to
continuing the strategic direction of the company around investing in our
strategic brands, achieving a best cost position and strengthening our
portfolio," said Mark Ketchum, interim chief executive officer of Newell
Rubbermaid. "We plan to make investments in advertising and promotion and
research and development around our high-potential, high-margin brands."
Ketchum added, "Developing best-in-class practices around product
innovation, consumer understanding and competitive benchmarking will be key
drivers for our business as we work to improve our financial performance for
our shareholders. We will place greater emphasis on the execution side of the
business fundamentals, and on identifying cost inefficiencies within selling,
general and administrative expense."
Gross margin for the third quarter 2005 improved to 31.3%, a 260 basis
point improvement from third quarter 2004 gross margin of 28.7%. The
company's productivity savings and favorable pricing offset raw material
inflation.
"We are facing increased costs around resin and other commodities, but
believe the recent spike in resin costs is temporary due to supply shortages
caused primarily by the hurricanes in the Gulf. We anticipate costs will
remain at these higher levels into next year, but expect some relief as
capacity continues to come back on-line," said Patrick Robinson, chief
financial officer of Newell Rubbermaid. "We will continue to take appropriate
actions around pricing and productivity to moderate a challenging commodities
environment."
During the third quarter 2005, the company recorded non-cash impairment
charges of $58.6 million. These charges were required to write down to fair
value certain assets related to the United Kingdom Window Fashions business in
the company's Home Fashions segment and the European Cookware business
reported in the company's Other segment. Consistent with the company's intent
to divest non-strategic businesses and concentrate on leveraging brand
strength and product innovation in its core portfolio of businesses, the
company announced on October 11, 2005, its intent to sell the European
Cookware business. This business will be reported as discontinued operations
beginning in the fourth quarter 2005.
The company continues to classify a business, formerly reported in the
Cleaning & Organization segment, as discontinued operations. During the third
quarter 2005, the company recorded a gain of approximately $20 million related
to this business as several line reviews with key retailers have increased the
company's valuation of this business.
Exceeding company expectations, net cash from operating activities was
$359.4 million in the third quarter 2005, compared to $284.8 million in the
third quarter 2004. The approximate $75 million increase was primarily driven
by a voluntary $50 million cash contribution to the company's pension plan in
2004, which was not repeated in 2005, as well as a reduction of inventory
levels. Capital expenditures in the third quarter 2005 were $23.9 million
compared to $25.0 million in the third quarter 2004. The company continued to
pay a strong dividend in the quarter of $57.9 million, or $0.21 per share.
Nine Month Results
Income from continuing operations for the first nine months of 2005 was
$241.8 million, or $0.88 per share. Excluding impairment charges, income from
continuing operations for the first nine months of 2005 was $300.4 million, or
$1.09 per share. These results include a tax benefit of $73.9 million, or
$0.27 per share offset by planned restructuring and related charges of
approximately $61 million, or $0.15 per share. Loss from continuing
operations for the first nine months of 2004 was $65.1 million, or $0.24 per
share. Excluding restructuring and impairment charges, income from continuing
operations for the first nine months of 2004 was $252.2 million, or $0.92 per
share. A reconciliation of the results "as reported" to results "excluding
charges" is attached to this press release.
Net sales for the first nine months of 2005 were $4.62 billion, a decrease
of 3.0% from $4.76 billion for the first nine months of 2004. Foreign
currency translation favorably impacted sales by 1.3% for the first nine
months, while pricing increased 2.0%. These were offset by a core sales
decline of 2.9%, primarily driven by the negative volume impact of price
increases in Rubbermaid Home Products and the continued weakness in the
European Window Fashions and Little Tikes businesses, and an additional 3.4%
resulting from the planned exit of certain low-margin product lines.
Net cash from operating activities was $451.3 million for the first nine
months of 2005, compared to $421.8 million for the first nine months of 2004.
Capital expenditures for the first nine months of 2005 were $69.9 million
compared to $95.2 million for the first nine months of 2004, reflecting the
company's continued decapitalization and efforts to reduce manufacturing
overhead. Dividends were $173.7 million for the first nine months of 2005.
Related to the divestitures of non-core businesses, the company recorded a
net loss of $67.5 million, reported as discontinued operations during the
first nine months of 2005.
Pension Outlook
The company estimates that it will record a fourth quarter non-cash charge
to shareholders' equity in the range of $40 to $60 million to record the
under-funded status of the pension plan. This charge will not impact earnings
or cash flow in 2005.
Outlook
The company continues to expect diluted earnings per share from continuing
operations for the full year 2005 to be in the range of $1.43 to $1.48. This
range excludes non-cash impairment charges of approximately $34 million, or
$0.12 per share, related to the United Kingdom Window Fashions business in the
company's Home Fashions segment. This outlook also does not include total net
losses reported as discontinued operations, including the company's European
Cookware business, expected to be approximately $95 to $105 million. The
company now expects internal sales to decline approximately 3% for the full
year 2005, primarily reflecting the company's strategic decision to exit
$200 million in annual revenue of low-margin product lines, the volume impact
related to its pricing strategy and continued weakness in its European Window
Fashions business.
For the fourth quarter 2005, the company expects diluted earnings per
share from continuing operations to be in the range of $0.33 to $0.38. The
company expects internal sales to decline 2% to 4% in the fourth quarter.
A reconciliation of the 2005 earnings outlook is as follows:
Full Year Fourth Quarter
Diluted earnings per share
from continuing operations
(as reported): $1.31 - $1.36 $0.33 - $0.38
Impairment charges $0.12 -
Diluted earnings per share
from continuing operations
(excluding charges): $1.43 - $1.48 $0.33 - $0.38
For the full year 2005, the company now expects net cash from operating
activities to be in the range of $610 to $660 million. Expenditures for
property, plant and equipment are now expected to be in the range of $100 to
$110 million and dividends are expected to be approximately $230 million for
the full year 2005.
The company has not changed its previous 2006 guidance.
Conference Call
The company's third quarter 2005 earnings conference call is scheduled for
today, October 27, 2005, at 9:30 a.m. ET. Those interested in participating
should call (800) 869-2139 or internationally at (719) 867-0347 and provide
the conference code 925536. The company's call will also be web cast. To
listen to the web cast, use the link provided under the Investor Relations
Home Page on Newell Rubbermaid's website at http://www.newellrubbermaid.com.
A replay will be available approximately two hours after the call
concludes through November 30, 2005, and may be accessed domestically at
(888) 203-1112 or internationally at (719) 457-0820. Conference call
conference code 925536 is required to access the replay.
Caution Concerning Forward-Looking Statements
The statements in this press release that are not historical in nature
constitute forward-looking statements. These forward-looking statements
relate to information or assumptions about the effects of Project
Acceleration, sales, income/(loss), earnings per share, operating income or
gross margin improvements, capital and other expenditures, cash flow,
dividends, restructuring, impairment and other charges, potential losses on
divestiture, costs and cost savings and the value thereof, debt ratings, and
management's plans, projections and objectives for future operations and
performance. These statements are accompanied by words such as "expect,"
"project," "will," "enable," "estimate," and similar expressions. Actual
results could differ materially from those expressed or implied in the
forward-looking statements. Important factors that could cause actual results
to differ materially from those suggested by the forward-looking statements
include, but are not limited to, our dependence on the strength of retail
economies in various parts of the world; competition with numerous other
manufacturers and distributors of consumer products; major retailers' strong
bargaining power; changes in the prices of raw materials used by the company;
our ability to develop innovative new products and to develop, maintain and
strengthen our end-user brands; our ability to expeditiously close facilities
and move operations in the face of foreign regulations and other impediments;
our ability to implement successfully information technology solutions
throughout our organization; our ability to improve productivity and
streamline operations; our ability to complete strategic acquisitions
(including DYMO); our ability to integrate previously acquired businesses; the
risks inherent in our foreign operations and those factors listed in the
company's most recent Form 10-Q or 10-K, including Exhibit 99.1 thereto, filed
with the Securities and Exchange Commission.
Non-GAAP Financial Measures
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. Included
in this release is a reconciliation of these non-GAAP financial measures to
the most directly comparable financial measures calculated in accordance with
GAAP.
About the Company
Newell Rubbermaid Inc. is a global marketer of consumer and commercial
products with 2004 sales of $6.5 billion and a powerful brand family including
Sharpie(R), Paper Mate(R), EXPO(R), Waterman(R), IRWIN(R), LENOX(R),
BernzOmatic(R), Rubbermaid(R), Graco(R), Calphalon(R) and Goody(R). The
company is headquartered in Atlanta, Ga., and has approximately 30,000
employees worldwide.
This press release and additional information about the company are
available on the company's web site at http://www.newellrubbermaid.com .
Newell Rubbermaid Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Reconciliation of Results "As Reported" to Results "Excluding Charges"
Three Months Ended September 30, 2005
As Reported Charges (1) Excl. Charges
Net sales $1,598.2 $1,598.2
Cost of products sold 1,098.0 - 1,098.0
GROSS MARGIN 500.2 - 500.2
% of sales 31.3% 31.3%
Selling, general &
administrative expense 311.5 - 311.5
% of sales 19.5% 19.5%
Impairment charge 58.6 (58.6) -
Restructuring costs 14.6 - 14.6
OPERATING INCOME (LOSS) 115.5 58.6 174.1
% of sales 7.2% 10.9%
Nonoperating expenses:
Interest expense, net 34.3 - 34.3
Other (0.6) - (0.6)
33.7 - 33.7
INCOME (LOSS) BEFORE INCOME
TAXES 81.8 58.6 140.4
% of sales 5.1% 8.8%
Income taxes 28.3 - 28.3
Effective rate 34.6% 20.2%
INCOME (LOSS) FROM CONTINUING
OPERATIONS 53.5 58.6 112.1
% of sales 3.3% 7.0%
Discontinued operations, net of
tax:
Net income (loss) 18.0 (18.0) -
NET INCOME (LOSS) $ 71.5 $ 40.6 $ 112.1
% of sales 4.5% 7.0%
EARNINGS (LOSS) PER SHARE FROM
CONTINUING OPERATIONS:
Basic $ 0.19 $ 0.21 $ 0.41
Diluted $ 0.19 $ 0.21 $ 0.41
EARNINGS (LOSS) PER SHARE FROM
DISCONTINUED OPERATIONS:
Basic $ 0.07 $ (0.07) $ -
Diluted $ 0.07 $ (0.07) $ -
EARNINGS (LOSS) PER SHARE:
Basic $ 0.26 $ 0.15 $ 0.41
Diluted $ 0.26 $ 0.15 $ 0.41
Average shares outstanding:
Basic 274.4 274.4 274.4
Diluted 275.0 275.0 275.0
Three Months Ended September 30, 2004
As Excl. %
Reported Charges (2) Charges Change
Net sales $1,621.3 $1,621.3 (1.4)%
Cost of products sold 1,156.6 - 1,156.6
GROSS MARGIN 464.7 - 464.7 7.6 %
% of sales 28.7% 28.7%
Selling, general &
administrative expense 297.9 - 297.9 4.6 %
% of sales 18.4% 18.4%
Impairment charge 270.0 (270.0) -
Restructuring costs 0.4 (0.4) -
OPERATING INCOME (LOSS) (103.6) 270.4 166.8 4.4 %
% of sales (6.4)% 10.3%
Nonoperating expenses:
Interest expense, net 29.5 - 29.5
Other (0.3) - (0.3)
29.2 - 29.2 15.4 %
INCOME (LOSS) BEFORE
INCOME TAXES (132.8) 270.4 137.6 2.0 %
% of sales (8.2)% 8.5%
Income taxes 22.9 16.1 39.0 (27.4)%
Effective rate (17.2)% 28.3%
INCOME (LOSS) FROM
CONTINUING OPERATIONS (155.7) 254.3 98.6 13.7 %
% of sales (9.6)% 6.1 %
Discontinued operations,
net of tax:
Net income (loss) (70.7) 70.7 -
NET INCOME (LOSS) $(226.4) $325.0 $98.6 13.7 %
% of sales (14.0)% 6.1%
EARNINGS (LOSS) PER SHARE
FROM CONTINUING OPERATIONS:
Basic $(0.57) $0.93 $0.36
Diluted $(0.57) $0.93 $0.36
EARNINGS (LOSS) PER SHARE
FROM DISCONTINUED
OPERATIONS:
Basic $(0.26) $0.26 $ -
Diluted $(0.26) $0.26 $ -
EARNINGS (LOSS) PER SHARE:
Basic $(0.83) $1.18 $0.36
Diluted $(0.83) $1.18 $0.36
Average shares outstanding:
Basic 274.4 274.4 274.4
Diluted 274.4 274.4 274.4
(1) Charges excluded from "as reported" results for 2005 consist of a
$58.6 million charge related to asset impairment and $18.0 million of
net income related to discontinued operations.
(2) Charges excluded from "as reported" results for 2004 consist of a
$270.0 million charge related to asset impairment, $0.4 million of
restructuring costs related to exiting certain facilities, and a $70.7
million net loss related to discontinued operations.
Newell Rubbermaid Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Reconciliation of Results "As Reported" to Results "Excluding Charges"
Nine Months Ended September 30, 2005
As Reported Charges (1) Excl. Charges
Net sales $4,616.3 $4,616.3
Cost of products sold 3,232.9 - 3,232.9
GROSS MARGIN 1,383.4 - 1,383.4
% of sales 30.0% 30.0%
Selling, general &
administrative expense 938.8 - 938.8
% of sales 20.3% 20.3%
Impairment charge 58.6 (58.6) -
Restructuring costs 21.1 - 21.1
OPERATING INCOME 364.9 58.6 423.5
% of sales 7.9% 9.2%
Nonoperating expenses:
Interest expense, net 96.2 - 96.2
Other (1.0) - (1.0)
95.2 - 95.2
INCOME (LOSS) BEFORE INCOME
TAXES 269.7 58.6 328.3
% of sales 5.8% 7.1%
Income taxes 27.9 - 27.9
Effective rate 10.3% 8.5%
INCOME (LOSS) FROM CONTINUING
OPERATIONS 241.8 58.6 300.4
% of sales 5.2% 6.5%
Discontinued operations, net of
tax:
Net loss (67.5) 67.5 -
NET INCOME (LOSS) $174.3 $126.1 $300.4
% of sales 3.8% 6.5%
EARNINGS (LOSS) PER SHARE FROM
CONTINUING OPERATIONS:
Basic $ 0.88 $ 0.21 $1.09
Diluted $ 0.88 $ 0.21 $1.09
LOSS PER SHARE FROM
DISCONTINUED OPERATIONS:
Basic $(0.25) $ 0.25 $ -
Diluted $(0.25) $ 0.25 $ -
EARNINGS (LOSS) PER SHARE:
Basic $ 0.64 $ 0.46 $1.09
Diluted $ 0.63 $ 0.46 $1.09
Average shares outstanding:
Basic 274.4 274.4 274.4
Diluted 274.8 274.8 274.8
Nine Months Ended September 30, 2004
As Excl. %
Reported Charges (2) Charges Change
Net sales $4,759.2 $4,759.2 (3.0)%
Cost of products sold 3,415.2 (14.9) 3,400.3
GROSS MARGIN 1,344.0 14.9 1,358.9 1.8 %
% of sales 28.2% 28.6%
Selling, general &
administrative expense 915.1 (1.7) 913.4 2.8 %
% of sales 19.2% 19.2%
Impairment charge 295.1 (295.1) -
Restructuring costs 47.7 (47.7) -
OPERATING INCOME 86.1 359.4 445.5 (4.9)%
% of sales 1.8% 9.4%
Nonoperating expenses:
Interest expense, net 89.9 - 89.9
Other 3.7 - 3.7
93.6 - 93.6 1.7 %
INCOME (LOSS) BEFORE INCOME
TAXES (7.5) 359.4 351.9 (6.7)%
% of sales (0.2)% 7.4%
Income taxes 57.6 42.1 99.7 (72.0)%
Effective rate (768.0)% 28.3%
INCOME (LOSS) FROM
CONTINUING OPERATIONS (65.1) 317.3 252.2 19.1 %
% of sales (1.4)% 5.3%
Discontinued operations,
net of tax:
Net loss (175.2) 175.2 -
NET INCOME(LOSS) $(240.3) $492.5 $252.2 19.1 %
% of sales (5.0)% 5.3%
EARNINGS (LOSS) PER SHARE
FROM CONTINUING OPERATIONS:
Basic $(0.24) $1.16 $0.92
Diluted $(0.24) $1.16 $0.92
LOSS PER SHARE FROM
DISCONTINUED OPERATIONS:
Basic $(0.64) $0.64 $ -
Diluted $(0.64) $0.64 $ -
EARNINGS (LOSS) PER SHARE:
Basic $(0.88) $1.79 $0.92
Diluted $(0.88) $1.79 $0.92
Average shares outstanding:
Basic 274.4 274.4 274.4
Diluted 274.4 274.4 274.4
(1) Charges excluded from "as reported" results for 2005 consist of a
$58.6 million charge related to asset impairment and a $67.5 million
net loss related to discontinued operations.
(2) Charges excluded from "as reported" results for 2004 are
restructuring, restructuring related and impairment charges and the
net loss related to discontinued operations. These charges consist of
$14.9 million in restructuring related costs associated with product
line exits (shown in cost of products sold), $1.7 million of
restructuring costs related to relocation of property and equipment
(shown in selling, general and administrative expense), $295.1 million
in asset impairment, $47.7 million of restructuring costs related to
exiting certain facilities (shown in restructuring costs), and a
$175.2 million net loss related to discontinued operations.
Newell Rubbermaid Inc.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)
September 30, September 30,
Assets: 2005 2004
Cash and cash equivalents $ 485.5 $ 354.5
Accounts receivable, net 1,082.1 1,136.9
Inventories, net 1,010.6 1,032.2
Deferred income taxes 69.7 115.3
Prepaid expenses and other 107.2 161.4
Current assets of discontinued operations 8.0 77.0
Total Current Assets 2,763.1 2,877.3
Other assets 232.7 271.7
Property, plant and equipment, net 1,005.7 1,256.9
Goodwill 1,769.0 1,794.4
Deferred income taxes 2.1 10.1
Other intangible assets, net 312.2 302.0
Non-current assets of discontinued operations 42.2 93.6
Total Assets $6,127.0 $6,606.0
Liabilities and Stockholders' Equity:
Notes payable $ 6.2 $ 14.0
Accounts payable 576.4 613.1
Accrued compensation 138.3 140.3
Other accrued liabilities 699.7 804.0
Income taxes payable 46.8 134.0
Current portion of long-term debt 25.4 215.0
Current liabilities of discontinued operations 0.1 33.5
Total Current Liabilities 1,492.9 1,953.9
Long-term debt 2,377.4 2,439.6
Other non-current liabilities 537.6 584.9
Long-term liabilities of discontinued
operations - 0.9
Stockholders' Equity 1,719.1 1,626.7
Total Liabilities and Stockholders' Equity $6,127.0 $6,606.0
Newell Rubbermaid Inc.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(in millions)
For The Nine Months Ended
September 30,
2005 2004
Operating Activities:
Net income (loss) $ 174.3 $(240.3)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 161.5 171.5
Impairment charges 58.6 374.0
Non-cash restructuring costs 5.3 25.3
Deferred income taxes 18.5 85.1
Gain on sale of assets/debt
extinguishment (7.1) (6.5)
Loss on disposal of discontinued
operations 67.4 90.5
Other (10.2) (4.8)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable 122.8 211.0
Inventories (92.0) (196.3)
Accounts payable (78.0) (55.9)
Accrued liabilities and other 20.7 (34.5)
Discontinued operations 9.5 2.7
Net cash provided by operating activities $ 451.3 $ 421.8
Investing Activities:
Acquisitions, net of cash acquired $ (35.3) $ (3.0)
Expenditures for property, plant and
equipment (69.9) (95.2)
Disposals of non-current assets and sale
of businesses 29.4 289.2
Net cash (used in) provided by investing
activities $ (75.8) $ 191.0
Financing Activities:
Proceeds from issuance of debt $ 134.1 $ 21.3
Payments on notes payable and long-term
debt (345.0) (251.9)
Cash dividends (173.7) (173.2)
Proceeds from exercised stock options
and other (2.8) 1.4
Net cash used in financing activities $(387.4) $(402.4)
Exchange rate effect on cash and cash
equivalents $(8.2) $ (0.3)
(Decrease) Increase in cash and cash
equivalents (20.1) 210.1
Cash and cash equivalents at beginning
of year 505.6 144.4
Cash and cash equivalents at end of
period $ 485.5 $ 354.5
Newell Rubbermaid Inc.
Calculation of Free Cash Flow (1)
For The Three Months Ended
September 30,
Free Cash Flow (in millions): 2005 2004
Net cash provided by operating activities $359.4 $284.8
Expenditures for property, plant and
equipment (23.9) (25.0)
Cash dividends (57.9) (57.6)
Free Cash Flow $277.6 $202.2
For The Nine Months Ended
September 30,
Free Cash Flow (in millions): 2005 2004
Net cash provided by operating activities $451.3 $421.8
Expenditures for property, plant and
equipment (69.9) (95.2)
Cash dividends (173.7) (173.2)
Free Cash Flow $207.7 $153.4
(1) Free cash flow is defined as cash flow provided by operating
activities less expenditures for property, plant and equipment and
cash dividends.
SOURCE Newell Rubbermaid Inc.
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CONTACT:
Nancy de Jonge Davis, Vice President,
Investor Relations & Corporate Communications, or Susan Masten,
Director, Public Relations of Newell Rubbermaid Inc.,
+1-770-407-3994, or fax, +1-770-407-3983
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